Service Tax - VCES - No provision to extend date for payment of first 50 per cent - HC
IN this case before the Delhi High Court, it is contended that the petitioner in the declaration filed before the Service Tax Authorities sought to declare the amount of Rs.3.87crores. In terms of its understanding, it claimed credit for the sum of Rs.81,35,729/- deposited by it earlier, i.e., prior to March, 2013. It also sought to seek credit for the sum of Rs.1,18,00,000/- paid between 18th March, 2013 and 10th July, 2013, in compliance of section 107(3). The Service Tax Authorities however refused to accept the declaration, taking the position that the credit claimed in respect of the earlier sum paid up to 18.3.2013 was based upon a wrong understanding of the provisions relating to the scheme. The tax authorities also held, consequently, that in the absence of 50% deposit under section 107(3) the application could not be entertained and proceeded with.
It is contended by the petitioner that the omission to provide an express provision for extension of time for deposit of the initial 50% cannot be construed to its prejudice given the objectives of the encouragement scheme. It was contended that pre-deposit or for that matter timely pre-deposit is not central for the purpose of the scheme as is evident from section 107(4) which in fact extends the time for deposit of balance 50%, enabling instalments to be paid first by 30.06.2014 and thereafter by 31st December, 2014. It was therefore contended that the mistake of including Rs.81,35,729/- as part of the declaration should be permitted to be rectified and that the declaration should be so read or construed as having been amended to exclude a reference to that amount.
The High Court observed,
The object of the "Service Tax Voluntary Compliance Encouragement Scheme, 2013" appears to the net escaped tax liability by service providers who are otherwise either in default or have not been assessed. It was to afford them a window of opportunity to voluntarily disclose their liability. In a sense it is similar to a permanent mechanism as the Settlement Commission or a voluntary disclosure scheme which the Central Government put in place in different tax regimes. Self contained nature of the scheme is evident from the definitions as well as the regime it dictates for a declarant who has offered to fully disclose the tax dues which are payable according to him and also make the necessary deposit as a pre-deposit for extension of the benefit which is immunity from the penalty, interest and other proceedings given under section 108. It would be worth noticing that the scheme itself was brought into force w.e.f. May, 2013. Assesees and service providers liable to service tax therefore had adequate time to weigh the choices and make necessary declaration under sections 106 and 107. The fact that the declaration regime required payment of 50% of the tax dues under section 107, and at the same time allowed flexibility for payment of the balance of 50% in this Court's opinion would not be fatal to the working of the scheme. In fact the right of the assessee to claim the benefit of the scheme is dependent upon its depositing the initial 50%. The assesee's income from rendering of services was not brought to tax for some reason or the other, due to omission, either wilful or inadvertent; such assesses were given more than enough time to consider whether they would make a disclosure under the Scheme. Once such disclosure was made, the applicant or declarant was entitled to be considered only upon deposit of 50% by 31.12.2013. The consideration prayed for by the petitioner that such initial deposit cannot be considered as mandatory cannot be granted, given the fact that the scheme is a package and does not permit any such division. The only relief available is by way of power to remove difficulties conferred upon the Central Government. We also notice that the authorities have not been given any discretion in the matter of grant of extension of time to make initial pre-deposit of 50% of the declared tax amount. In fact, the consequences are spelt out for failure to pay the tax dues under section 110. In these circumstances the claim in the petition for a direction to extend the period or alternatively for deleting the sum of Rs.81 lakhs from the declaration already filed cannot be granted.